GrubHub Files For $100M IPO

Grubhub has officially thrown its hat into the I.P.O. ring, with the public filing of its prospectus Friday morning. The online ordering firm, which merged with competitor Seamless in August, filed the prospectus confidentially with the SEC last week under a new provision introduced by the JOBS act aimed at making the IPO process less expensive for smaller companies.

In the filing, the company, which plans to trade on the New York Stock Exchange under the ticker symbol “GRUB,” said it was seeking to raise $100 million in the offering, the same amount Yelp planned to raise when the reviews site filed its S-1 in November 2011. Today, the two companies do not compete directly, but the move puts the food ordering giant on a collision course with Yelp as the two firms look to wrangle local consumers who increasingly expect to search, compare, and buy in a single keystroke.

The merger between Seamless and GrubHub last year makes navigating the firm’s financials a bit more complex, but the prospectus points to solid overall growth. The company said it grew the number of restaurants on its platform — a key indicator for online ordering — from 10,000 in 2012 to over 28,000 last year, due in large part to the addition of 14,000 restaurants as a result of the merger with Seamless. Without the merger, Grubhub added 4,000 restaurants in 2013, marking a 40% growth from the year earlier 2013 and a slight acceleration from the 33% growth the firm saw in 2012.

The company also accelerated the number of active diners last year — again, a figure that was largely affected by the merger. According to the filing, Seamless alone grew the number of active diners to 1.1 million in Q2 2013, a 38% increase from a year earlier. The merger added another 1.9 million users from GrubHub, bringing the total number of users to over 3.4 million by the end of the year.

For the most part, the growth in its network has translated into a strong balance sheet. The company, which makes its money by charging restaurants a commission for each transaction that the platform processes, is profitable. Together, the now-merged firms generated $137 million in revenue in 2013, with Grubhub contributing $26.3 million from the beginning of the year until the merger closed on August 8th.

In an interesting twist, and one that underscores the delicate relationship between the commerce and search businesses today, the company said in the filing that it allows for a form of paid placement. Restaurant owners can pay larger commissions in order to show up higher in the results page — a tactic which has become a point of contention for local search sites. Yelp, which vehemently denies doing so, has come under fire from businesses over the past two years, who claim that the site favors positive reviews for businesses that advertise with the firm.

For the past decade, Yelp and Seamless have coexisted peacefully, kept apart by the depth of the local market opportunity and the sheer difficulty in building a their respective products. But as the local technology ecosystem has grown, it’s becoming more efficient — and increasingly, search and commerce businesses no longer can afford to avoid one another.
There are a number of other firms competing across a range of local verticals, but the restaurant industry is arguably the most developed, and Yelp and GrubHub Seamless are the clear leaders in their respective sectors. It’s reasonable to argue that the competition between the two firms will offer an early peek into how the collision of search and commerce business may play out in other industries.